Impressive returns from the S&P 600
These days, the S&P 500 is once again being driven higher by a limited group of stocks, namely big tech and mega caps, while most names in the index are delivering relatively humdrum returns.
Then there’s small caps. The S&P 600 index of U.S. small company stocks is in the midst of a broad-based rally that is outpacing the average large cap stock in the S&P 500* by 7.6% year to date (see the chart). Small caps are even beating the tech-heavy (and recently red-hot) Nasdaq 100 index by 5.3% for the year.
Small Caps vs. S&P 500 Equal Weight Year-to-Date Excess Returns
Bloomberg, calculations by Horizon, data as of 04/24/2026.
One big reason for that outperformance: Unlike large, multinational businesses, the small companies that make up the S&P 600 do most of their business domestically and are therefore benefitting disproportionately from the strong U.S. economic environment. Additionally, small-caps’ valuations are attractive relative to their larger cousins, prompting investors to bargain hunt in the space.
In some ways, the S&P 600 has taken the baton from the S&P 500 Equal Weight index, which was beating the S&P 500 by as much as 6.3% back in late February but has since given back nearly all of that relative outperformance.
The upshot: While the large-cap market struggles to broaden out beyond tech and mega-caps, the small cap stock universe is showing itself to be a key component of outperformance in 2026. With this week’s initial release of first-quarter gross domestic product (GDP) data, we’ll get an updated view of the economic conditions that have been helping drive the small-cap rally. Continued resilience would support the case that cyclical, domestically oriented market segments (such as small caps) could continue to outperform.
*As measured by the S&P 500 Equal Weight Index
Authored by Mike Dickson, Ph.D.
Originally posted on Horizon Investments
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The S&P SmallCap 600 Index is a stock market index established by S&P Global Ratings. It covers roughly the small-cap range of American stocks, using a capitalization-weighted index. Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the widely-used S&P 500. S&P 500 is a stock market index tracking the stock performance of 500 leading companies listed on stock exchanges in the United States. This commentary is written by Horizon’s asset management team. Past performance is not indicative of future results. Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves the risk of loss.
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